Tuesday, November 20, 2007

Laughter is the Best Medicine XV: Trials and Tribulations of Doing Business in Russia

"When Aleksei Panteliushin turned up at Plutos, his sausage factory in northern Moscow, one frosty morning, he found a gang of robust young men guarding the entrance as blacksmiths replaced the glass door with a steel one and reinforced the bars on the windows. He called the police. They went in, stayed for ten minutes—and left again. He called the internal security agency, the FSB. The same thing happened. He called his lawyer, who tried to go in and was told that if he persisted, they would 'rip his head off'. When Mr Panteliushin at last gained entry, together with a senior police officer, three of the goons introduced themselves as 'Stanislav,' 'Alexander' and 'Sergei'. They said they were Plutos's new owners, and flourished a document from the justice ministry to prove it.

"Shortly afterwards, they invited Mr Panteliushin to a meeting and offered to buy his share in the company at well below market value. They had already got his employees to sell them their shares far too cheaply, on pain of being fired. Mr Panteliushin declined. Instead he wrote a statement, collected supporting signatures from some 40 employees, and — with the thugs openly tailing his car — filed the case with every law-enforcement agency he could think of.

"He was told that the authorities did not get involved in 'ownership disputes'. When he took his woes to his local tax officials, who at least were friendly, thanks to his annual Christmas gifts of sausages, they shrugged and showed him a sheaf of 15 or 20 similar complaints in the same district. A journalist recommended the Economic Security Commission of the Moscow mayor's office, where an official listened to the tale. The next day Mr Panteliushin got a call from a non-governmental organisation called 'Protection of Shareholders' Rights'. This turned out to consist of a pair of affable young men with no address on their business cards, who said they knew those concerned and offered to 'mediate'... The new owners, the mediators said, were now offering to sell the factory back for $6m, several times what it was worth."

The upshot?

"After a local newspaper picked it up, the police started taking an interest [in the story], and he learned that other companies that had been approached about buying his factory were backing off... he and the bandits were waiting it out. Increasingly desperate to sell, they were phoning him for advice on making sausages, and offering to hire him back to run the business."

This item received an average of 10 points on a scale of 1 to 10 from 14 raters.